If you’ve been working from home during the coronavirus lockdown, you may be incurring different expenses than when you were working from an office or workspace.
In an attempt to alleviate some of the financial burdens of the pandemic, HMRC now offers a simplified way to claim the costs of working from home as valid business expenses. But can you claim your home broadband as a business expense?
For those who are self-employed, completing a self-assessment tax return each year is part of the job, and knowing what you can and can’t write-off could make a big difference to your annual tax bill.
If like many of us you’re using your home as your office, you can offset some of your household bills in your tax claim. HMRC will accept reasonable estimates even if you only use your home for minor business use.
In these cases, HMRC will accept a reasonable estimate provided your claim is small and reflects your circumstances. This includes bills such as heat, electricity, council tax and water.
The simplest way is to calculate your allowable expenses using a flat rate based on the hours you work from home each month. This means you don’t have to spend time working out the proportion of personal and business use for your home.
Hours of business use per month: 25 to 50 = £10 51 to 100 = £18 101 and more = £26
If you’re working from home full time these days, you can claim a maximum of £26 per month, but you can also add in any hours from the rest of the year to go towards your total claim.
For example, if for this financial year you worked over 101 hours from home for six months, and then worked 60 hours from home for another six months:
6 months x £26 = £156 6 months x £18 = £108
The total you can claim for the year = £264
However, these expenses do not include phone or broadband use.
Unfortunately, broadband and phone expenses are difficult to claim back as there’s no clear-cut way to differentiate the use of your broadband for work and personal services. For your phone expenses, you can provide an itemised breakdown of calls and charges that you incurred for business purposes, but as broadband bills are typically a flat rate this isn’t possible.
If you already had broadband in your home before you were required to work from home, you can’t claim it as an expense and your employer, if you have one, can’t reimburse you for your broadband charges tax-free.
Advice from HMRC states; “If an employee who begins to work from home under homeworking arrangements is already paying for a broadband internet connection at home, there is no additional expense.”
However, if you didn’t already pay for broadband before being required to work from home, this is an additional household expense that your employer can reimburse tax-free (again, see the full details from HMRC). This may also be the case if you have to upgrade your existing home broadband or pay for new equipment for business reasons.
If you’re self-employed, then you could set up a new broadband account in your company’s name while using your home as an office. This would make it easier to claim this as a business expense.
Additional office equipment such as laptops, monitors and printers can all be deducted from your tax amount if you’re self-employed, as well as software licences for the duration of lockdown.
If you’re employed, talk to your manager to see whether the business will pay for all or part of the equipment you need. It’s best to have this conversation before you buy anything too expensive in case you are left carrying the whole cost. A good employer should see the benefit of giving you a good working environment at home.
New to working from home due to the pandemic? Take a look at these 11 items that make working from home easier.